I. INTRODUCTION: REENVISAGING BERS AS A LEGITIMATE AND EFFECTIVE TOOL FOR PUBLIC POLICY CONSIDERATION
Block exemption regulations (‘BERs’)Footnote 1 automatically discharge certain categories of agreements from the EU prohibition on anti-competitive agreements, without engaging in a detailed case-by-case analysis. An agreement that satisfies the terms of a BER enjoys a safe harbour, namely a presumption that the protected categories of agreements do not restrict competition in the meaning of Article 101(1) of the Treaty on the Functioning of the European Union (‘TFEU’)Footnote 2 or satisfy ‘with sufficient certainty’ the conditions of Article 101(3) TFEU.Footnote 3
BERs are commonly viewed as an administrative-procedural tool, aimed at reducing the Commission's and national competition authorities’ (‘NCAs’) workload and at providing legal certainty for undertakings. They were originally introduced as a pragmatic device to accommodate the colossal number of notifications resulting from the old enforcement regime of Regulation 17/62, which required all undertakings to notify their agreements to the Commission before implementation for the purpose of receiving a negative clearance or an exemption.Footnote 4
Despite their success as a bureaucratic, workload-reduction instrument, around the turn of the millennium, BERs were increasingly criticised as incompatible with the modern system of EU competition law enforcement. Regulation 1/2003, which entered into force in May 2004, abolished the old notification regime and decentralised the enforcement.Footnote 5 Shifting to an enforcement system based on self-assessment, agreements that fulfil the conditions of Article 101(3) TFEU are now automatically accepted. As the Commission is no longer faced with the burden of responding to notifications, the workload-reducing function of the BERs has mostly perished. Following the modernisation of EU competition law, there are very few enforcement actions in which the Commission and NCAs discussed the application of the BERs to a specific agreement, and even less that declared that an agreement could be saved by a BER.Footnote 6
Moreover, since the mid-1990s, BERs were condemned as an overly formalistic enforcement device, sacrificing ‘economic precision in favour of administrative efficiency’, and instigating an (over)simplified economic analysis that is being ‘at once over and under inclusive’.Footnote 7 They were dubbed as a ‘fossilised’ administrative device, ‘relics from the past’ providing certain sectors or practices with a unique competition analysis in a manner that distorts consistent enforcement across all markets and sectors and does not match any proper economic justification.Footnote 8 This criticism was particularly directed at sectoral BERs, which apply to specific sectors rather than to certain types of practices. They were regularly condemned as a means of market regulation and undue protectionism, which cannot be squared with the effects-based approach of modern EU competition law enforcement.
Although BERs have lost much of their functional, constitutional, and substantive footings,Footnote 9 EU competition law has kept this instrument. Regulation 1/2003 did ‘not affect the validity and legal nature’ of the BERs.Footnote 10 Despite some suggestions, they were not replaced with guidelines detailing the application of Article 101 TFEU to specific circumstances, sectors, or practices, which could have provided undertakings with some legal certainty.Footnote 11
Why do BERs still exist in EU competition law? This article proposes that BERs are not merely a procedural-administrative tool aimed at workload reduction or at increasing legal certainty. They are also the expression of a clearly defined political consensus on the appropriate balance between competition and public policy considerations.Footnote 12 The article maintains that BERs were already used to account for public policy. They have exempted otherwise anti-competitive agreements in favour of helping EU firms to compete internationally, levelling the playing field for small and medium enterprises(‘SMEs’), mediating the effects of economic crisis, and safeguarding stability and security of supply of services in liberalised sectors. Furthermore, it suggests that BERs should be further used to resolve some of the pressing challenges of EU competition law, such as determining the degree and form of permitted cooperation between undertakings to achieve sustainability goals or the protection of workers’ rights in the gig-economy. Notwithstanding the notorious reputation BERs have (perhaps rightly so) gained over the years, BERs can—and should—be used as an instrument to develop the EU's internal and external industrial policy and account for other public policy considerations.
This is certainly not a popular contention. In fact, it goes against the vast majority of scholarship on the matter.Footnote 13 Nevertheless, this article defends BERs by submitting that they have the potential to function as a superior balancing instrument in comparison to the conventional tools that were used to take into account public policy consideration—including Article 101(3) TFEU individual exemptions,Footnote 14 the legal doctrines developed by the EU Courts to conclude that there is no restriction of competition under Article 101(1) TFEU (eg the Wouters exception),Footnote 15 soft policy instruments such as the Commission's guidelines, and decisions not to enforce Article 101 TFEU due to public policy considerations (balancing by means of enforcement discretion).Footnote 16 BERs are supported by a wide political agreement of Member States, EU institutions, businesses, and public interests groups, and offer pre-determined and transparent rules to strike a balance between values that cannot be reconciled. They can safeguard the political accountability and democratic legitimacy of the independent competition authorities, particularly when faced with sensitive legal, economic, or societal challenges; promote uniformity and legal certainty in the decentralised self-assessment enforcement setting; enhance efficiency by reducing compliance and enforcement costs; invite scrutiny and debate that will lead to the adoption of more effective rules; and foster experimentalism and flexibility.
The article is constructed as follows: Part II begins by presenting the traditional workload-reducing function and legal certainty motivation of the BERs and how they were diminished following the entry into force of Regulation 1/2003. By focusing on the text of the BERs and the description of the political and public debate surrounding their adoption, application, and amendments, it highlights the turn of the tide against the BERs since the 1990s and the growing criticism of this enforcement device.
Part III suggests that the survival of the BERs can be explained by their role as a tool to account for public policy considerations and the development of the EU industrial policy. Introducing an alternative characterisation of the BERs enforcement device, this part takes a positivist law approach. It demonstrates the balancing role of the BERs by analysing the provisions of various general and sectoral BERs, the legislative process preceding their adoption, and their interpretation in the Commission's guidelines and annual reports.
Part IV, takes a more normative stance. It defends BERs as a legitimate and effective balancing tool having significant advantages over the ‘traditional’ balancing tools of Article 101(1) TFEU doctrines, Article (3) TFEU individual exemptions, and balancing by means of enforcement discretion. Part V rejects proposals to replace BERs with guidelines, arguing that guidelines do not offer similar advantages when it comes to the consideration of public policy.
Finally, Part VI concludes, calling to make greater use of BERs for balancing purposes. Such function, it is argued, may be particularly welcomed to tackle new and old challenges, such as those related to sustainability agreements, promoting the EU's internal and external industrial policy, and protecting vulnerable workers’ rights.
II. THE DIMINISHING OF THE TRADITIONAL FUNCTION AND LEGITIMACY OF THE BERS
A. BERs Prior to the Modernisation of EU Competition Law
The genesis of the BERs is inherently tied to workload-reducing concerns. Article 103 TFEU, the legal basis for adopting BERs, entrusts the Council, on a proposal of the Commission after consulting the European Parliament, to lay down ‘detailed rules for the application of Article 101(3), taking into account the need to ensure effective supervision on the one hand, and to simplify administration to the greatest possible extent on the other’.Footnote 17 By offering a clear set of (relatively) straightforward rules, BERs allowed the Commission to quickly review a large number of agreements without engaging in a case-specific analysis.
The centrality of the workload-reducing function was reflected in the design of the BERs’ terms. In the past, each BER included a detailed list of restrictions that could be included in an agreement without infringing Article 101 TFEU (‘white’ clauses), and restrictions that would cause the agreement to lose the BER's safe harbour (‘hard core restrictions’ or ‘black’ clauses). From the mid-1980s, some BERs also included a third category of restrictions that would trigger an ‘opposition procedure’ (‘grey’ clauses). Accordingly, provisions that did not fall under either the permitted or prohibited lists had to be notified to the Commission, but were presumed to be exempted unless the Commission opposed them within six months.Footnote 18
This design facilitated a formalistic competition law analysis. Once an agreement was notified to the Commission, the investigation was based on a ‘pigeon-holing’ exercise—verifying that the agreement only contained white clauses and did not include hardcore restrictions or clauses triggering the opposition procedure. Centring on determining whether an agreement contained certain provisions and omitted others, the Commission could swiftly review the notified agreements. In particular, as most of the old BERs did not consider the market power held by the undertakings,Footnote 19 the analysis did not call for market definition and share calculation.
The workload-reducing function also guided a rigid interpretation of the BERs. An agreement would lose the protection of the safe harbour even when a trivial or technical detail prevented a single clause from complying with the list of white clauses.Footnote 20 Similarly, when doubts arose as to the scope of protected practices, the Commission called to rely on the ‘system and aims’ pursued by the BERs. A flexible interpretation of their terms, according to the Commission, ‘would not be justified in an effort to avoid anticipated difficulties of a practical nature, i.e., a large number of notifications’.Footnote 21 Carrying significant administrative benefits, such a formalistic approach eased the burden of notification.
BERs have assisted to reduce the Commission's workload also by providing undertakings with strong legal certainty as to the expected fate of their notified agreements.Footnote 22 This legal certainty had two aspects.Footnote 23 First, BERs were designed to offer a clear and predictable set of rules, leaving a limited margin of discretion as to their application to a specific agreement.Footnote 24 While the Commission could withdraw the benefits of a BER when a specific agreement produced effects that were incompatible with the conditions of Article 101(3) TFEU,Footnote 25 in practice it has hardly made use of such powers.Footnote 26 Second, the legal certainty was strengthened by the Commission's statements—in a formal decision, informal comfort letter, or by lack of an objection in an opposition procedure—confirming that the agreement can benefit from the BER. The strong legal certainty offered by BERs had incentivised firms to conclude agreements that complied with the BERs’ terms, which in turn, reduced the Commission's workload in assessing them.
Indeed, up until the entry into force of Regulation 1/2003, BERs primarily aimed to lessen the Commission's administrative burden of notifications. When the first BER on Distribution Agreements was adopted in 1967, the Commission was already faced with a backlog of almost 40,000 notifications. The BER had successfully removed almost three-quarters of the cases on the Commission docket.Footnote 27 Similarly, in the mid-1980s, newly adopted BERs were expected to help clear around two-thirds of the Commission's backlog.Footnote 28
The workload-reducing aim has kept its prominence throughout the 1990s and early 2000s. A review of the Commission's annual report reveals that it has become particularly vital upon the enlargement of the EU and the opening-up of new sectors to competition, leading to an increased number of agreements being caught under Article 101 TFEU.Footnote 29 The vertical and horizontal BERs adopted in the late 1990s have further lightened the Commission's workload as they no longer required notification of the agreements to benefit from their safe harbour. BERs also helped to alleviate the Commission's workload by sharing the burden of enforcement with national courts. While national courts were not competent to grant an individual exemption, they had the power to declare that an agreement was protected by a BER as a directly applicable regulation.Footnote 30
Alongside the workload-reduction function and the legal certainty benefits, BERs have always had a secondary aim. They were not only designed to reduce the Commission's workload or provide undertakings with legal certainty, but also to harmonise business behaviour across the common market by encouraging undertakings to draft their agreements to mirror the list of white clauses.Footnote 31 BERs fostered market integration and cross border trade, helped open liberalised markets to competition, increased the international competitiveness of European firms, and levelled the playing field for SMEs.Footnote 32 They played an important part in the arsenal of the EU's internal and external industrial policy tools.
This ‘industrial engineering’Footnote 33 function is explicitly pronounced by the Council's Enabling Regulations, which entrust the Commission to adopt BERs. The preamble of those regulations declare that ‘it is desirable’ that the Commission would use BERs to exempt agreements ‘if they are modified in such manner as to fall within a category defined in an exempting regulation’.Footnote 34 Indeed, the Commission had regularly encouraged undertakings to modify the terms of their agreements to fit the BERs safe harbours,Footnote 35 and viewed this market influencing aim favourably up until the first part of the 1990s.Footnote 36
B. BERs Following the Modernisation of EU Competition Law
The turn of the millennium challenged the workload-reducing function, legal certainty benefits, and the market influencing motivation of the BERs. This has led to a three-front opposition against BERs:
First, from a procedural-pragmatic point of view, the new enforcement regime of Regulation 1/2003 has obliterated the Commission's task of responding to notifications by shifting to a decentralised self-assessment regime. As the Commission is no longer faced with the burden of responding to notifications, the workload-reducing function of the BERs has mostly lost its value. The new self-assessment regime also decreased the legal certainty BERs provide for undertakings. While BERs still aim to offer clear and predictable set of rules that can assist with self-assessment, the Commission and NCAs generally do not declare—formally or informally—that a specific agreement benefits from the terms of a BER.Footnote 37
Second, from a constitutional point of view, the Regulation has transformed Article 101(3) TFEU into a directly applicable provision. Article 101(3) TFEU individual exemptions, like BERs, now have direct effect. This raises doubts about the role of BERs, which under the new enforcement system, ‘exempt agreements that are, if they satisfy the four substantive criteria set out in Article [101](3), already exempt’.Footnote 38
Third, from a substantive point of view, there was a growing feeling of unease as to the BERs’ compatibility with the more economic approach to EU competition law.Footnote 39 Korah and Hawk famously warned against the ‘straitjacket effect’ of BERs,Footnote 40 submitting that their formalistic approach had strongly incentivised firms to alter efficient agreements as not to risk losing the legal certainty brought by the BERs.Footnote 41 This left firms very little leeway to shape the terms of their commercial transactions, in a manner that benefited neither businesses nor consumers, stifled innovation, and deterred the conclusion of pro-competitive agreements.Footnote 42
While often attributed to those two commentators, a similar line of criticism was already raised a decade earlier by the European Parliament. Noting the ‘inadequate manpower resources available to DG IV’, the Parliament warned against ‘an excessive dependence on techniques to “short cut” proper competition procedures’, including ‘persuading companies to adapt their procedures to conform with block exemptions instead of applying its discretionary power to grant individual exemption in each case’.Footnote 43 The overreliance on BERs, according to the Parliament, had artificially limited the operation of businesses in the EU while ignoring the changing commercial, economic, and technological realities.Footnote 44
Towards the late 1990s, the criticism against the straitjacket effect of the BERs was widely accepted by the CommissionFootnote 45 and the epistemic communityFootnote 46 alike. The first seeds of a transformation were already planted in the Technology Transfer BER of 1996,Footnote 47 yet the Vertical Agreements BER of 1999 was the first to fully represent a new generation of BERs.Footnote 48 It abolished the list of permitted practices and the opposition procedure—granting undertakings the freedom to devise their agreements according to their commercial needs—and subjected the exemption to the market power held by the undertakings by setting a market share threshold. Subsequent BERs followed this more effects-based approach.
The new generation of BERs has helped to align the terms of the BERs to the new era of EU competition law enforcement. At the same time, the new generation of BERs undermine the workload-reducing function and legal certainty benefits associated with the BERs because they require the undertakings—and the Commission, NCAs, and courts upon review—to engage in market definition and market share calculations. This is a resource-intensive exercise that generates uncertainties particularly when the definition of markets is challenging, or when the undertakings’ market shares are not far from the protected threshold.Footnote 49
Despite the procedural, constitutional, and substantive challenges, in the past 20 years, only very limited scholarship had criticised the BER instrument as such.Footnote 50 This is particularly true with respect to the general BERs, which exempt categories of business practices and apply without distinction to all sectors (eg Horizontal and Vertical Agreements BERs). As elaborated in Section III.B below, such BERs are typically less contentious because they are aligned with the more economic approach to Article 101(3) TFEU individual exemption, and apply to agreements having limited anti-competitive effects or that can be justified by economic efficiencies.
At the same time, sectoral BERs (sometimes also known as industry-specific BERs), are still condemned as protectionist measures sheltering inefficient industries and impeding market efficiency.Footnote 51 For that reason, in parallel to the shift to the effects-based BERs, the Commission began to eliminate the number and range of the sectoral BERs: the Vertical Agreements BER of 1999 had replaced several older BERs that dealt with specific forms of vertical restraints.Footnote 52 The Commission explained the codification of the rules into a single BER by the desire to avoid ‘as far as possible, a policy bias in the choices companies make concerning distribution formats’ and promote commercial choices that are ‘based on commercial merit and not, as under the current system, on unjustified differences in exemptability’.Footnote 53 For similar reasons, that BER revoked the sector-specific rules for beer and petrol, noting that awarding such special treatment was ‘not justified on economic or legal grounds’.Footnote 54 According to the Commission, even when sector-specific treatment is justified, it should be detailed in guidelines rather than in a BER.Footnote 55
This trend was followed with the decision to let the Insurance BER lapse after it expired in March 2017,Footnote 56 and the progressive reduction of the special rules protecting agreements in the transport sector.Footnote 57 While the Commission abolished many of the sectoral BERs or replaced them with non-binding guidelines, they still exist. Sectoral BERs shelter anti-competitive practices related to the conditions for the purchase, sell or resell of spare parts for motor vehicles and the repair and maintenance services, technical agreements and grouping of SMEs in the field of inland transport, and liner shipping (consortia),Footnote 58 despite continuing condemnation noting they are not in line with economic theory.Footnote 59
The following parts maintain that the survival of both general and sectoral BERs can be explained—and justified—by their role as a balancing tool to account for public policy considerations. The next part first demonstrates this role and Part IV advocates the use of BERs for such a purpose.
III. A TOOL TO ACCOUNT FOR PUBLIC POLICY CONSIDERATIONS
A. Two Preliminary Observations: The Role of Public Policy Considerations in Article 101 TFEU
Before moving to discuss the role of public policy considerations in the BERs, some introductory remarks must be made about the role of such considerations in Article 101 TFEU enforcement more generally. This topic is subject to a heated debate for many years and was reignited recently upon growing calls to tolerate some anti-competitive agreements that safeguard environmental protection,Footnote 60 industrial policy objectives,Footnote 61 or workers' rights in the gig-economy.Footnote 62 Whereas a detailed account of such discussion goes beyond the scope of this article, it is sufficient to note the following two preliminary observations:
The first observation is that there is no doubt that up until the entry into force of Regulation 1/2003 in May 2004, public policy considerations have regularly played a role in the enforcement.Footnote 63 A wide array of non-competition interests—such as maintaining adequate levels of employment, promoting culture, increasing social cohesion, and reducing omissions—were taken into account when granting Article 101(3) TFEU individual exemptions, as well as by legal doctrines that were developed by the EU Courts declaring that there was no restriction of competition in the meaning of Article 101(1) TFEU when an agreement was justified due to overriding public or commercial interests.
The role of public policy considerations following modernisation is more quarrelsome. Some argue that the Courts’ old case law leaving room for public policy considerations was based on the lack of direct applicability of Article 101(3)'s individual exemptions. Since Regulation 1/2003 had transformed the Article into a directly applicable provision, the argument goes, the provision should no longer leave room for balancing as to allow it to be clear, precise, and unconditional.Footnote 64 Others contest this view, as well as the Council's competence to alter the nature of Article 101(3) TFEU by means of Regulation 1/2003.Footnote 65 Such debate, nevertheless, is mostly relevant for the issuance of individual exemptions. It has only a limited bearing when it comes to the consideration of public policy within BERs, which as mentioned—were always directly applicable.
The search for the role of public policy considerations following modernisation is further unclear since as a matter of policy, the Commission has been advocating an interpretation that considerably narrows down the room for such considerations and focuses the analysis on the impact of a practice on consumer welfare and economic efficiencies. Nevertheless, although the Commission has a central role in enforcing and developing EU competition law and policy, only the European Court of Justice (‘ECJ’) is competent to take decision on the interpretation of EU competition law. The ECJ, however, did not fully and clearly endorse the Commission's narrow interpretation. In fact, the EU Courts and some national competition authorities and courts sometimes continue to follow a broader interpretation leaving much leeway for the consideration of public policy.Footnote 66
The second preliminary observation necessary for our discussion is that despite the common legal basis of Article 101(3) TFEU individual exemptions and the BERs—including the presumption that the BERs protect categories of agreements that satisfy the conditions of Article 101(3) TFEU, the law and policy on the role of public policy considerations in applying each of those instruments have developed rather independently. This might be tied to the different institutional settings. As elaborated in Section IV.A below, while individual exemptions are granted by the Commission and NCAs,Footnote 67 BERs are the proceeds of a lengthy political compromise involving all of the EU institutions, the Member States, members of the industry, and interest groups. Such actors often envisioned a more multi-faceted competition regime than the Commission, pursuing multiple policy objectives.Footnote 68 As such, by design, BERs are more likely to reflect a wide array of public policy considerations beyond the protection of competition in comparison to individual exemptions.
B. The Role of Public Policy in Both General and Sectorial BERs
Keeping the above two preliminary observations in mind, this section moves to examine the role of public policy in BERs.Footnote 69 The CommissionFootnote 70 and the literatureFootnote 71 often distinguish between two types of BERs: general and sectoral. As elaborated below, those two types of BERs differ in the nature of considerations they take into account and the margin of discretion left in their application. While general BERs mostly focus on the balance between competition interests and economic efficiencies and leave only limited discretion to balance when applying them to a specific agreement, sectoral BERs incorporate wider types of public policies and merit a broader discretion. This section suggests that when it comes to the consideration of public policy, the two types of BERs are not as different as they may appear. Notwithstanding some important differences, both can and are being used to justify some limitations of competition in favour of promoting EU industrial policy and other public policy considerations.
Sectoral BERs express a relatively clear balance between competition and public policy. They reflect a tailored, industry-specific political balance between multiple considerations, going beyond the efficiency-focused approach to Article 101(3) TFEU individual exemptions that has been advocated by the Commission following modernisation. By taking a more favourable view of certain restrictions of competition, and often setting higher market share thresholds in comparison to the general BERs,Footnote 72 sectoral BERs allow the Commission to ‘find a reasonable compromise between the many interests involved’.Footnote 73
Many sectoral BERs were adopted to regulate markets undergoing privatisation and liberalisation.Footnote 74 For instance, at a time various means of inland, maritime, and air transport and the insurance sector opened to competition, sectoral BERs were introduced to facilitate a second-best solution in previously state-owned or heavily regulated markets. Whereas full competition is not deemed desirable or possible in such markets, they offer a confined and limited degree of competition.Footnote 75 They limited competition to ensure the stability and quality of such services and of the undertakings providing them and safeguarded national interests.
Sectoral BERs are highly contentious because they embed a wide array of public policy considerations. As such, they give raise to a risk of instrumentalising the competition rules for a quasi-regulatory purpose, shifting the focus of analysis away from the potential anti-competitive effects of the agreements and serve as a means of ex ante regulation intended to meet the objectives of sector-specific regimes.Footnote 76 The Regulation on Inland Transport, for example, did not only grant a safe harbour for technical agreements promoting efficiencies,Footnote 77 but also accepted serious restrictions of competition such as grouping of SMEs into purchasing and crisis cartels.Footnote 78 The Regulation on Maritime Transport exempted serious restrictions of competition including the fixing of rates and conditions of carriage and market-sharing agreements, invoking ‘the distinctive characteristics of maritime transport’.Footnote 79 Such types of restrictions are unlikely to be accepted under the rules and practices governing the interpretation of Article 101(3) TFEU individual exemptions.
Sectoral BERs do not only differ from general BERs in their subject matter, but also in the type of analysis they require. Sectoral BERs typically merit a more nuanced analysis, leaving the Commission, NCAs, and EU and national courts wider discretion when applying them to a specific agreement. Some sectoral BERs order a full competition analysis which does not significantly differ from the application of Article 101(3) TFEU individual exemptions.Footnote 80 Others call for a proportionality test. The Motor Vehicles BER of 2002, for instance, required the Commission, NCAs, and courts to determine what is the legitimate level of access to technical information, diagnostic, and other equipment that is necessary to meet the independent repairers’ needs or for the implementation of environmental protection measures.Footnote 81 Such a decision merits a value judgment as to the appropriate balance between the protection of competition and the safeguarding of the independent repairers’ interests and environmental protection aims. In addition to questions surrounding the democratic legitimacy and political accountability of the Commission and NCAs to take such decisions,Footnote 82 this degree of discretion may limit the legal certainty provided by the sectoral BERs and workload-reducing potential of the BERs.
General BERs, by comparison, might not appear to serve a balancing function at first sight. As mentioned, they mostly address agreements that do not significantly restrict competition or that create economic efficiencies despite restricting the commercial freedom of the undertakings. The Horizontal and Vertical BERs, for example, declare that they accommodate benefits associated with risk sharing, cost-saving, increased investments, pooling of know-how, enhancement of product quality and variety,Footnote 83 research and development (‘R&D’), and innovation.Footnote 84 The types of economic efficiencies the general BERs take into account, therefore, mostly mirror the scope left to the consideration of such policies within Article 101(3) TFEU individual exemptions.
Such considerations are clearly relevant under Article 101(3) TFEU, even according to the more economic approach advocated by the Commission. Yet, striking a balance between the harm to competition caused by an agreement and the generated efficiencies is not purely an economic, value-free exercise. BERs do not solely rely on a strict welfare analysis and often require a policy compromise between conflicting and incommensurable values.Footnote 85 This is admitted by the Commission, noting that ‘strict economic theory is just one of the sources of [the Vertical BERs] policy’.Footnote 86 General BERs also reflect a specific choice between different measures of allocative, productive, and dynamic efficiencies and between short- and long-term effects.
The need to strike such a balance was reflected in the Commission's account of the legislative process preceding the adoption and the amendment of the BERs. In its 1983 annual report, for example, it explained that when drafting the provisions of the R&D BERs its ‘basic approach has been to seek the best possible balance between on the one hand a reinforcement of the competitivity of European industry and on the other hand the maintenance of workable competition’.Footnote 87 Similar considerations guided the adoption of the Technology Transfers BERs in 1996, aiming to establish a balance between ‘the creation of a legal environment that will promote technical innovation and its dissemination within the European Union, while at the same time ensuring that healthy competition and the completion of the single market are not affected’.Footnote 88
Moreover, at times, general BERs went beyond the balancing of economic efficiencies. Some were directly designed to offer SMEs an advantageous position on the market,Footnote 89 or to strengthen the ability of the European industry to compete internationally.Footnote 90 Others were directed at facilitating free movement of goods across borders and market integration.Footnote 91 General BERs were also used to mediate the effects of EU accession in new Member States. The Exclusive Purchasing BER, for example, eased the conditions for exemption for agreements that were in force in Spain and Portugal on the date of their accession.Footnote 92 More recently, it was suggested that general BERs may also include provisions on sustainability agreements.Footnote 93
The above demonstrates that both general and sectoral BERs were—and can be—used to limit competition in favour of promoting the EU's external and internal industrial policy or other public policies. Although sectoral BERs typically do that more openly and may leave greater leeway and flexibility for the competition authorities, general BERs are not limited to the balance of pro- and anti-competitive effects. The next part suggests that there are good reasons for the continued use of both general and sectoral BERs for the consideration of public policies within the EU competition law enforcement regime.
IV. THE BENEFITS OF BERS AS A BALANCING TOOL
Using BERs to balance competition and public policy considerations is problematic, to say the least. It opens the door for abuse of the political process, to the lingering of suspicious lobbying efforts and protectionism and to regulatory capture, and may threaten the legitimacy, credibility, and economic soundness of EU competition law enforcement. Undoubtedly, the reservations made about the BERs—and especially the sectoral ones—were reinforced given the involvement of pressure groups in their adoption and some dubious choices as to their scope and terms. One example is the Motor Vehicles BER. Applying to vehicles having three or more wheels (and not to motorcycles),Footnote 94 it was openly adopted to protect the interest of competitors and not only of competition.Footnote 95 Such concerns may be amplified given the lack of a guiding principle as to when sector-specific rules are codified within a BER, and when they are regulated by soft law instruments. For example, while vehicles having three or more wheels are subject to the BER, motorcycle distribution is governed by a press release;Footnote 96 while changing market conditions in the air transport sector were embedded in the terms of the BERs, a communication was used to relax the competition rules to remedy adverse effects caused to the airline industry during the Gulf War.Footnote 97
That said, this part presents arguments supporting the use of BERs. It suggests that adequately drafted BERs can offer a pre-determined and transparent balancing tool, which promotes the uniformity and legal certainty within the decentralised self-assessment regime of Regulation 1/2003 and safeguards the political accountability and legitimacy of EU competition law to a greater extent than other ‘conventional’ balancing tools. BERs can facilitate a debate on the role of public policy, reduce compliance and enforcement costs, and provide a scope for regulatory flexibility and experimentalism.
It should be noted from the outset that this is not to say that using BERs for balancing purposes is flawless, nor that it cannot be (ab)used for populist or protectionist purposes. Rather, it is argued that BERs offer a superior balancing tool in comparison to the traditional balancing tools of Article 101(1) and (3) individual exceptions, the Commission's guidelines, or balancing by the exercise of enforcement discretion, and that some of the flaws associated with balancing via BERs can be remedied by facilitating debate and wider participation.
A. Safeguarding Independence in Parallel to Democratic Legitimacy and Political Accountability
One of the main arguments against the consideration of public policy within Article 101 TFEU stems from the institutional makeup of EU competition law enforcement. When the Commission and NCAs enforce Articles 101 and 102 TFEU, they generally enjoy a high degree of independence from political influences and external pressures.Footnote 98 They cannot seek or receive instructions from governments and from other public or private entities. This is particularly true when it comes to the consideration of public policy. The competition authorities must act independently when they apply Articles 101(1) and (3) TFEU to a specific agreement and when deciding whether or not to pursue a specific case.
While the independence of the authorities protects the integrity of EU competition law, it may not fit the task of balancing interests. Commentators have already recalled that competition authorities—and especially the NCAs—are lacking the political accountability and democratic legitimacy to strike a balance between the incommensurable legal, economic, and social considerations.Footnote 99
Against this background, BERs provide a unique ex ante policy tool for the consideration of public policy, which is the result of a lengthy and continuous political-democratic cycle. By streamlining the competition authorities’ discretion to balance the competing interests, BERs can reinforce the democratic legitimacy and political accountability of their decisions without compromising their independence in a specific case. The process of adopting, revising, and applying a BER is a unique phenomenon in EU competition law in that it allows the Member States, Council, Commission, EU Courts, EU Parliament, NCAs, and members of the industry and interest groups to be directly involved in the formulation and application of the EU competition rules.Footnote 100 As elaborated below, BERs are a constantly evolving legal tool, as each BER is adopted for a limited time,Footnote 101 typically expiring after a period of between ten to fifteen years.
The adoption of a BER begins with an Enabling Regulation. Adopted by the Council, it entrusts the Commission to enact BERs dealing with a certain category of agreements. Over the years, the Member States insisted that the Council—formed by the heads of the Member States—will retain control over the scope and timing of adopting BERs. Thus, when the first Enabling Regulation was proposed by the Commission in the mid-1960s, the Council rejected the Commission's call for a one-time delegation of powers that would have left the Commission a free hand in deciding what BERs to adopt and when.Footnote 102 Similarly, in the course of the negotiations preceding the adoption of Regulation 1/2003, the Member States refused to allow the Commission to adopt BERs independently, noting that a ‘large majority’ of the Member States’ delegations felt that this would leave the Commission ‘too much scope for action without proper consultation of Member States and consider that the Council should continue to establish the framework for the scope of block exemption regulations’.Footnote 103
The Council's involvement in the adoption of BERs is especially noteworthy when compared with the Commission's great powers in the field of competition law and policy. This involvement suggests that the Member States view BERs as a matter of the EU's political agenda and priorities, which in turn fits their characterisation as a substantive instrument to balance competing interests, rather than just an administrative, workload-reduction tool.
Next, on the basis of an Enabling Regulation, the Commission defines the terms of each BER.Footnote 104 At times, the drafting of the BERs terms involved negotiations between the Commission's various directorates. The adoption of the Technology Transfer BER of 1996, for example, generated a fierce battle between the Directorate-General for Competition, which called to introduce a market share threshold requirement, and the Directorate-General for Industry, which warned that such a threshold is strict and complex.Footnote 105 Not less importantly, the Commission's immense influence on the BERs is not only reflected in its powers to determine how to give effect to the Enabling Regulation, but also in its competence not to issue a BER despite delegation of such powers from the Council.Footnote 106
The EU Courts play an important part too. The exemptions set forth by the BERs must comply with the case law interpreting the conditions of Article 101(3) TFEU. Accordingly, BERs are drafted and amendedFootnote 107 to match the developments of case law. At times, the EU Courts had even a greater influence. Because the adoption of each BER is a lengthy process, they had the opportunity to rule on the appropriate interpretation of Article 101(3) TFEU during a time when the Commission examined the same question for the purpose of drafting a BER. This meant that controversial terms of BERs were outlined by the EU Courts rather than the Commission.Footnote 108
After a draft BER is formed, it undergoes consultation with all Member States through the Advisory CommitteeFootnote 109 and with the NCAs.Footnote 110 This opens for the Member States additional room to express their national interests. In the past, the Member States have also retained control through the opposition procedure. Included in many of the old generation BERs, this procedure had obliged the Commission to oppose granting an exemption if a Member State had requested it. In addition, while the Commission was generally free to withdraw its opposition at any time, in such a case it had to consult the Member States via the Advisory Committee before doing so.Footnote 111
The general public—including commercial and industrial interest groups—can also submit their observations on a draft BER.Footnote 112 In particular, the Commission declared that it seeks comments from national chambers of commerce of the Member States, the International Chamber of Commerce, the European Bureau of Consumers' Unions (BEUC), and the Union of Industries of the European Community (UNICE).Footnote 113 Since the mid-1990s, in a bid to increase public participation, the Commission publishes Green Papers prior to adoption and amendments of BERs, summarising the studies on the sector in question and setting out the proposals put forward by the various groups concerned.Footnote 114 This combination of consultation methods—including open online consultations, stakeholder conferences and consultation in closed fora—allows the Commission to receive inclusive and diverse input from various types of actors, and mediate risks of regulatory capture and undue influence of business.Footnote 115
Those consultations are not merely a rubber-stamping exercise. The Commission stressed that it publishes the draft BERs ‘not only for information purposes, but also in order to obtain feedback from interested parties on how they are received’, noting that it ‘attaches the greatest importance to its [legislation] proposals being put forward in full knowledge of all the facts, with due account being taken of the points of view of the various sectors concerned’.Footnote 116 When it received a large number of written reactions, it organised conferences,Footnote 117 and even extended the validity of an old BER to engage with the comments more closely.Footnote 118 Occasionally, such feedback had led to substantial modifications to the proposed BERs.Footnote 119
Finally, also the European Parliament has its say. The Commission is obliged to report to the Parliament on the application of BERs, and the Parliament has the power to recommend revisions.Footnote 120 In addition, since the 1970s, the Commission enacted an informal consultation policy, by which it consults with the relevant committees in the parliament when it has ‘sufficiently crystalized its position’ on a proposed BER.Footnote 121 The Commission underline the value it attaches to the political component of such opinions, ‘in particular as the points of view are of a more political nature and the diverging opinions inherently represented in a parliamentary forum can serve to highlight the problems involved in the broadest possible way’.Footnote 122 Every so often, the Commission changed the terms of a BER following the Parliament's opinion, pleading to limit the full application of Article 101 TFEU in specific types of agreements or sectors.Footnote 123
B. Enhancing Transparency: Effective Rules, Legal Certainty, and Uniformity
Following the entry into force of Regulation 1/2003, the role of public policy consideration in the enforcement of Article 101 TFEU is mostly hidden. As shown elsewhere,Footnote 124 instead of engaging in a complex balancing of competition and public policy under the balancing tools of Article 101(1) and (3) TFEU, the Commission and NCAs often refrain from pursuing cases against anti-competitive agreements that raise public policy questions, terminate the investigation, or settle by accepting negotiated remedies even if the agreement cannot satisfy the conditions for an exception. Whereas under the old enforcement regime the Commission had to address such matters directly when responding to notifications, in the self-assessment regime the role of public policy considerations is mostly hidden in the ‘dark matter’ of the enforcement.
This lack of transparency has a number of adverse effects:Footnote 125 it reduces legal certainty, as the competition authorities do not publicly explain if and what role public policy considerations have played in a decision not to pursue a case; it has a detrimental impact on the integrity of Article 101 TFEU, because public policy considerations may play a greater role than what is permissible under Articles 101(1) and (3) TFEU tests; it may hamper uniformity across the EU, as it masks the fact that NCAs follow divergence practices; and, it may stand in the way of the effectiveness and legitimacy of the enforcement, because EU competition policy can be ‘fully supported by business, policymakers, and the general public only if it is widely understood. To achieve this aim the [EU's] approach in this area must be fully transparent’.Footnote 126
BERs offer an alternative to remedy those shortcomings. BERs, by their very nature, are directed at strengthening legal certainty. They (should) offer ex ante, transparent rules of thumb for the consideration of public policy, which are typically straightforward to apply and require only limited discretion. The increased legal certainty, in turn, does not only inform the undertakings’ self-assessment, but can also foster the uniformity of the enforcement by harmonising the interpretation of Article 101 TFEU across the Member States.Footnote 127 This was highlighted by the Modernisation White Paper of 1999, noting that as a piece of ‘legislative text’, BERs are an important tool to ensure that competition policy is still determined at the EU level despite decentralisation.Footnote 128
The BERs’ safe harbour may be particularly welcomed in proceedings taking place in front of the NCAs. Even following entry into force of Regulation 1/2003, only the Commission can adopt a formal decision finding that an agreement is not in breach of Article 101(1) TFEU or fulfil the conditions of Article 101(3) TFEU.Footnote 129 An NCA can only declare that there are no grounds for action on its part when, based on the information in its possession, the conditions for Article 101 TFEU have not been met.Footnote 130 While the Commission or another NCA may reach a different conclusion, BERs can provide undertakings with additional legal certainty by binding all EU institutions, competition authorities, and courts.
Admittedly, the promise of legal certainty offered by the BERs—and thus of uniformity—is far from perfect. Some legal certainty was lost due to the shift to the new generation of effects-based BERs, which are grounded on market share calculation and use open-ended provisions.Footnote 131 Yet, there are some good indications that although such concerns are valid, they should not be exaggerated. An empirical examination of the Commission's and five NCAs’ practices shows that the new generation of BERs were rarely invoked or accepted as a defence by the competition enforcers and courts. This implies that in general, undertakings were able to correctly self-assess their practices. Such a conclusion is further supported by comments submitted to Commission's consultation, indicating that respondents believe that the BERs increase legal certainty even in comparison to guidelines.Footnote 132
Hence, while time and effort should certainly be dedicated to enhancing the effectiveness and legal certainty of the provisions of BERs, the enforcement tool as such may still offer greater effectiveness, legal certainty, and uniformity compared to the traditional balancing tools.
C. Efficiency: Compliance and Enforcement Efforts
The increased transparency and legal certainty resulting from (clearly) codifying the role of public policy within a BER may encourage compliance and reduce litigation costs.Footnote 133 To this end, BERs may play a double role of deterring undertakings from concluding agreements that cannot be justified due to public policy considerations and of eliminating a chilling effect that prevents undertakings from engaging in welfare-enhancing agreements.Footnote 134 This is particularly welcomed under the self-assessment regime of Regulation 1/2003, whereby undertakings bear the risk of error as to the fulfilment of the conditions for exceptions. The Commission acknowledged that BERs may facilitate better understanding of EU competition law and generate stronger political support by members of the industry, policymakers, and the general public alike.Footnote 135
For essentially the same reasons, BERs can help free the competition authorities’ resources.Footnote 136 Instead of investing their scarce resources to strike a complex and sensitive balance between competition and public policy considerations, the Commission and NCAs could focus on their other enforcement priorities.
Arguably, BERs can also increase law compliance by facilitating private enforcement. Although there is no presumption that agreements that cannot benefit from a BER are illegal, the Commission declares that agreements falling within the list of hardcore practices are unlikely to be justified under Article 101(3) TFEU.Footnote 137 The Commission has seemed to hint that the list of hardcore restrictions serves as a signal inviting injured parties to submit private claims in front of national courts.Footnote 138
Where doubts arise on compliance of certain agreements with the terms of a BER, either in public or private enforcement settings, the burden of proof may work to the benefit of the competition authorities or private plaintiff. Despite the information asymmetry resulting from the lack of a notification in the new self-assessment system, once a potential infringement of Article 101(1) TFEU is established, the burden shifts to the undertakings to prove that they comply with the conditions of Article 101(3) TFEU.Footnote 139 In ‘grey-zone’ cases, when it is unclear if an agreement can benefit from the scope of BER due to public policy considerations, the undertakings will need to produce the evidence justifying the limitation of competition.
D. Developing the Law: Facilitating Legal, Economic, and Public Debate on the Role of Public Policy
The transparency brought about by the BER also creates an opportunity for a meaningful debate on the role of public policy within EU competition law enforcement—and as such—is essential for the development of effective rules. As mentioned, currently much of the consideration of public policy in individual cases is developed as a matter of policy rather than of law, and is being carried out in an informal and non-transparent manner, meaning that such questions cannot later be reviewed by EU and national courts. This also leaves limited room for legal, economic, and socio-political scrutiny. The continuous political-democratic cycle that is facilitated by the BERs and the transparency it brings, therefore, is not only important for their own development, but also for forming the general EU policy and the rules governing a case-by-case assessment.
Moreover, facilitating a public debate might remedy some of the shortcomings associated with balancing by means of BERs. Encouraging a transparent and open discussion on the desired role of public policy during the process of adopting, evaluating, and amending the BERs can help forge the boundaries of the balance embedded in the BERs themselves, safeguarding the BERs against protectionism and undue lobbying. This could be promoted by encouraging diverse and wide-ranging submissions by actors representing industry, consumers, and the general public and by using diverse consultation mechanisms.Footnote 140
Clearly, there is a risk that the Commission and NCAs will avoid challenging cases in the ‘grey-zone’ of the BERs. If such risk materialises, questions about the consideration of public policy within BERs will too be shifted to the dark matter of enforcement.Footnote 141 Yet, differing from the traditional balancing tools, it is more likely that some of those questions will see the light of day during the continuous political-democratic cycle taking place in adopting, reviewing, and amending the BERs.
E. Temporal Nature of BERs: Flexibility and Experimentalism
The limited lifespan of each BER offers a unique space for regulatory experimentalism and flexibility. BERs, as was already mentioned, are adopted for a limited period. They are regularly reviewed and amended. This allows the EU institutions and the competition authorities to ‘test the water’, to investigate a balance between competition and public policy considerations without the risk of being bound to a legal precedent for many years to come.Footnote 142
Along those lines, the Commission declared that an amendment of a BER is an opportunity for ‘re-balancing the various interests involved’,Footnote 143 to revise a BER when the premise underlying it was ‘no longer entirely up to date and that the regulation's objectives had not all been attained’,Footnote 144 to introduce changes to ‘forestall any misuse’ of the exemptions,Footnote 145 and to determine that the four cumulative conditions of exempting a category of agreements under Article 101(3) TFEU were no longer met.Footnote 146
BERs were also used to provide short-term solutions. In some cases, BERs were adopted to mediate adverse effects resulting from liberalisation of markets in the interest of undertakings, their employees, and their customers, which were later amended to meet the progress of the liberalisation process.Footnote 147 In other cases, transitional provisions in BERs provide the industry with a necessary time span to adapt to legislative changes.
A decision granting an individual exception under Articles 101(1) and (3) TFEU balancing tools, by comparison, could not offer such room for experimentalism and flexibility. Such a decision does not only bind its direct addressees, but also carries a de facto precedential effect. Even when it comes to non-binding national ‘no ground for action’ findings, the articulation of the competition authority's interpretation of the law is likely to be relayed on by other undertakings in the future.
The temporal nature of BERs can also substitute some of the benefits Article 101(3) TFEU individual exemptions had under the old notification regime, which were lost following the transition to self-assessment. In the past, individual exemptions were often granted by the Commission for a limited period, and could be extended if need be.Footnote 148 Undoubtedly, even under the self-assessment regime, an individual exception may still be limited in time, for example, apply only as long as a restriction is deemed necessary and proportionate to achieve the benefits produced by an agreement.Footnote 149 Yet, the temporal effect of the individual exceptions has lost much of its sway because it is very difficult to pinpoint the exact point in time when an agreement does no longer comply with the conditions of the Article. BERs, therefore, can provide much needed legal certainty for undertakings as to the duration of the exemption.
A BER can provide the Commission and NCAs with flexibility even during its limited lifespan. A BER may be amended while it is in force to exclude terms that do no longer seem to be justified or to avoid abuse.Footnote 150 In addition, the Commission and NCAs (following prior notification to the Commission)Footnote 151 may withdraw the benefits of a BER from a specific agreement, when such an agreement does not produce objective advantages that compensate for its negative effects on competition.Footnote 152 While withdrawal should not be used frequently and may hamper the very legal certainty the BER aims to promote,Footnote 153 the mere threat of withdrawal can safeguard against abuse and provide the competition authorities with a back door to control unexpected effects.Footnote 154
The possibility for withdrawal, furthermore, is not limited to situations of abuse; it may also apply to adapt to changing economic realities. The Commission, for example, declared that it will investigate a possible withdrawal of the BER on Motor Vehicle Distribution upon the emergence of large-scale price differences between Member States. Faced with the threat of withdrawal, car manufacturers and their industrial organisation agreed to cooperate with the Commission accepting various measures to reduce such price differences.Footnote 155 Similarly, the possibility for a withdrawal of the Technology Transfer BER intended to ensure that undertakings having a very strong position in a market would not block the introduction of innovations competing with their own products and particularly innovatory SMEs.Footnote 156
Therefore, although BERs are a binding form of legislation, they are a dynamic tool. The ‘granting and taking away of block exemptions’, in the words of the European Parliament, ‘should be a dynamic process. Block exemptions should not be “hewn in stone”’.Footnote 157
V. GUIDELINES ARE NOT A GOOD SUBSTITUTE
The criticism voiced against the functional, constitutional, and substantive justifications of BERs led some commutatorsFootnote 158—including the CommissionFootnote 159—to consider replacing them with soft-law guidelinesFootnote 160 detailing the application of Article 101 TFEU to specific circumstances, sectors, or practices.Footnote 161 Such guidelines, it was argued, could ensure a similar degree of legal certainty and facilitate self-assessment, as well as safeguard the uniformity of the enforcement in the decentralised regime. This part maintains that while guidelines are a useful and important legal instrument to supplement BERs, they do not offer a compelling substitute when it comes to the balance of competition and public policy considerations.
The Commission has a long history of issuing guidelines in parallel or shortly after the adoption of BERs, going back to the exclusive distribution and purchasing agreements guidelines of 1983.Footnote 162 In addition to legal certainty,Footnote 163 such guidelines aimed at encouraging a uniform application,Footnote 164 becoming particularly important following decentralisation.Footnote 165 Moreover, it was suggested that guidelines might help adapt the BERs to the more economic approach. The Commission Modernisation White Paper of 1999, for example, declared that soft policy instruments are ‘particularly well suited to the interpretation of rules of an economic nature, because they make it easier to take account of the range of criteria that are relevant to an examination under the competition rules’.Footnote 166 Their relatively high degree of specificity and use of examples fit the task of communicating the Commission's interpretation and the analytical approach it will pursue.Footnote 167
When it comes to the balance of competition and public policy considerations, nevertheless, stand-alone guidelines, substituting rather than supplementing BERs, fail to provide the full benefits of BERs as a tool to balance competition and public policy:
First, guidelines have only limited effect in enhancing the democratic legitimacy and political accountability of the balance between competition and public policy considerations. As early as the first guidelines on the exclusive distribution and purchasing agreements, it became clear that guidelines do not only codify existing rules and case law, but also express considerable value choices.Footnote 168 Although the Commission engages in broad consultations, guidelines are ultimately adopted by the Commission alone. The Commission enjoys substantially greater autonomy to design the scope of protected practices, policy objectives, and the terms of analysis. Moreover, guidelines are not subject to the same strict reporting requirements, nor to the conditions of the withdrawal procedure. Guidelines, as such, do not reflect the same EU-wide consensus and continuous political-democratic cycle of the BERs.
The potential of using BERs to increase democratic legitimacy and political accountability of balancing was illustrated by the 2021 consultations over the Horizontal BERs. When asked whether there were other elements that should have been clarified, added, or removed from the draft BERs on R&D and Specialisation Agreements, stakeholders called to include provisions rewarding sustainability goals and adapting the BERs to mirror technological and digital developments.Footnote 169 Some NCAs also asked to include provisions on the application of Article 101 TFEU to self-employment professionals and during the Coronavirus pandemic.Footnote 170
The Commission decided to address only a limited range of those questions in its updated draft, notably leaving the rules on sustainability agreements to its guidelines.Footnote 171 The Vertical Guidelines of 2022 repeat a similar approach.Footnote 172 This seems like a lost opportunity. Adding such provisions could have gone beyond the mere restatement of the law. Drawing such terms would have inevitably required making difficult legal, economic, and political choices, on matters that stakeholders and NCAs signalled as unclear and important and which are subject to much academic debate. Instead of leaving this balance to the discretion of each (independent) competition authority that is not well placed to engage in such a balancing of interests, the BER could have determined the law based on a broad social agreement.Footnote 173
Second, and for similar reasons, guidelines are less effective in developing the law by way of facilitating legal, economic, and public debate on the role of public policy. Determining the role of public policy in the enforcement of EU competition law is mostly left to the Commission as a matter of policy, rather than developed in law.
Third, while guidelines can certainly increase the transparency by clarifying how the law is being interpreted and applied, they bring about only limited uniformity and as such legal certainty. As soft law instruments, guidelines are binding on the Commission alone. Unless the provisions of guidelines are explicitly applied to an individual case and later confirmed by the EU Courts, the NCAs and EU and national courts can—and often do—deviate from them.Footnote 174
Fourth, the lack of a binding effect on EU Courts and national enforcers limits the reduction in compliance and enforcement costs. Given the room for deviation, undertakings must self-assess their conduct in light of multiple (national) approaches, and cannot assume that conduct that is permitted by the Commission's guidelines will automatically be tolerated by NCAs and national courts or by the EU Courts if they later become subject to an appeal.
Finally, guidelines offer only limited flexibility and experimentalism advantages over BERs. They are not necessarily quicker to adopt or amend,Footnote 175 and despite being a soft law instrument, the Commission cannot easily deviate from them. While guidelines ‘may not be regarded as rules of law which the administration is always bound to observe’ the Commission ‘may not depart in an individual case without giving reasons that are compatible with the principle of equal treatment’.Footnote 176 In other words, if the Commission wishes to accept an anti-competitive practice due to overriding public policy considerations, it would need to justify its position with reference to its regular competition rules and more economic approach or explain why different rules should apply. BERs, by comparison, permit deviation from the ‘regular’ competition law analysis—and can be capped in time or later amended if need be—thereby leaving greater room for flexibility and experimentalism.
VI. CONCLUSION
This article defended BERs as a valuable tool for balancing competition with public policy considerations. BERs offer a pre-determined and transparent balancing tool that is based on an EU-wide consensus, safeguarding the political accountability and legitimacy of EU competition law, promoting uniformity and legal certainty, reducing compliance and enforcement costs, facilitating a debate that could lead to more effective rules, and offering room for regulatory experimentalism and flexibility. It suggested that despite the bad reputation BERs gained over the years, they may offer a better way to embed public policy within Article 101 TFEU enforcement in comparison to the conventional balancing tools. Moreover, instead of leaving the development of the balance to be determined as a matter of policy in the course of exercising the discretion of each competition authority, balancing by means of BERs can shift those questions back to the scope of the law, which would be determined on the basis of a broad social consensus.
This is not to say that BERs go without faults. Poor BERs were unquestionably adopted over the years, reflecting bad law, bad economics, and/or bad politics. Nevertheless, this article suggested that openly embracing BERs as a balancing tool may remedy some of those shortcomings. An EU-wide discussion on the role of public policy within the process of adopting, evaluating, and amending the BERs—involving all EU institutions, the Member States, NCAs, and wide public participation—can bring about analytically sound and clear rules that rest on sounds and flexible understanding, from theory and experience.Footnote 177 Such rules can increase the quality of the BERs themselves, as well as the rules applicable to Article 101(1) and (3) TFEU individual exceptions.
Using BERs to account for public policy considerations may be particularly welcomed to tackle some of the EU's contemporary challenges. Questions regarding the room left for sustainability initiatives, cooperation among self-employed and gig-economy workers, and the creation of EU-champions cannot be decided merely based on the current legal rules or an economic welfare analysis. Those are complex socio-political choices that deserve to be determined on the basis of broad public and political debate. BERs may offer such a way forward.
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